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Columbia Threadneedle Investments is shutting its standalone UK smaller companies division as investors pull money ahead of a UK Budget that could further undermine confidence in the ailing sector.
The US fund group, which manages about $672bn globally, is merging the UK small cap team into its wider European smaller companies unit, which it said was aimed at using resources “in the most efficient way”.
The move comes amid a broader restructuring and job cuts at the fund manager, which also confirmed that Catherine Stanley, co-head of UK equities, and fund manager Gordon Happell, will leave the firm.
The decision to close the division comes at a difficult period for smaller UK stocks as investors pull money from the sector, which has underperformed the FTSE 250 and blue-chip stocks. Aim shares have dropped about 10 per cent since the UK general election was called in May.
Some investors are concerned that the Labour government will remove inheritance tax relief on small cap shares listed in London’s junior Aim market and increase capital gains tax in Wednesday’s Budget.
Bankers and fund managers have warned that dropping inheritance relief on Aim stocks could cause a “cliff edge” moment for the junior market, forcing more investors to sell.
Shares held on Aim are generally exempt from inheritance tax, so long as they qualify for business property relief and are held for longer than two years before the death of their owner.
Columbia Threadneedle said the expanded European small cap equities team will consist of six investment managers running more than £5bn in assets. The fund group closed one of its UK smaller cap funds earlier this year as dwindling assets made it too costly to run.
The pan-European team will be led by Mine Tezgul and includes Phil Dicken, James Thorne, Craig Adey, Quang Le and Ed Bottomley. The company’s remaining UK equity managers will run larger stocks.
As part of the broader restructure, the company will combine its responsible investment research team with the 125-strong global fundamental research division. Columbia Threadneedle said this would cut costs and ensure that ESG is a part of the whole investment process.
The changes have resulted in a handful of job cuts, according to a person close to the process.
Columbia Threadneedle said: “Within equities, we have invested in and grown our pan-European equity research team based in London to support our UK, European and global fund managers.”
It added it had also brought a number of its fixed-income researchers and analysts focused on high yield and emerging market debt into the global team, reflecting “the nature of corporate fixed-income markets”.
Columbia Threadneedle Investments was so-named in 2015 after US fund group Columbia acquired UK investment manager Threadneedle Investments.
